MENA COVID-19 Situation Report Middle East & North Africa Outlook Issue 12 – Updated 15 June 2020 Florence Eid-Oakden, Ph.D [email protected] Tel: +44 203 239 4518 With CharleneArabia Rahall & MonitorBouchra Abaakil MENA Outlook Q2 2020 COVID-19 Situation Report: GCC (1) Country Economic & Fiscal Health & Travel Related Bahrain has been hit by the spread of COVID-19 and by lower oil prices. The kingdom's fiscal situation still presents risks. Bahraini growth was revised to a 3.6 contraction in 2020 from positive growth of 2.1% forecast last October and compared with a 1.8% pickup in 2019. After a reduction in the public-sector workforce of about 18%, the government plans to decrease expenditure through a centralised procurement structure, reducing transfers by balancing the Electricity and Water Authority’s budget, and reforming subsidies. We do not believe Bahrain will make large cuts to expenditure, given its low, albeit increasing, flexibility. • USD 11.4B stimulus package (29% of GDP) • Estimated # of Infections to Date: 18,544 (Cases per Million: 10.921) • Doubling the Liquidity Fund to BHD 200M • Announced # of Deaths to Date: 45 (Deaths per Million: 27) • Waiver on utilities bills for three months • Delay in loans instalments for six months • Limits on social gathering of more than 150 people Bahrain • Banned lenders from freezing customers’ accounts in case of lost jobs • Closed all cinemas, sports centres, gyms, salons • Cut overnight lending rate to 2.45% from 4% • Bahrain will allow passengers to transit through its airport although • Finance Ministry to withdraw funds with a 5% ceiling from the public account entry into the country will be limited only to citizens • Waiver on rents and allowance from all tenants of municipal properties • Launched a virtual mall to enable shops to continue serving their customers • USD 570M for salaries of 100,000 employees in the private sector Apr-Jun • Bahrain’s shops and industrial enterprises opened on 7 May, while • Slashed spending by ministries and government agencies by 30% restaurants remain closed for dine-in customers • Central bank issued bonds worth USD 793M • All non-essential medical services resumed operations • Lower rate for internet usage • Commercial and industrial businesses can resume usual operations * USD 46.1M package aimed at supporting business owners who are not covered by • Bahrain plans to reopen schools in September insurance, students from needy families, and for the sanitisation of towns * Increase monthly allowances to 11,000 orphans and widows by 20% GDP in Kuwait is forecast to contract by 1.1% in 2020 from 1.5% growth previously forecast by the IMF in October. Oil price volatility and the impact of COVID-19 have seriously hit the outlook. The much-awaited MSCI listing of Kuwait’s companies into its emerging markets index in May has been postponed indefinitely. With Kuwait yet to pass a revised debt law authorising the government to borrow, there are questions about how future central government deficits will be financed. As anticipated, further fiscal consolidation measures have been announced, particularly after Kuwaiti Emir Sabah al-Ahmad al-Jaber al-Sabah's public statement regarding the impact of the oil price drop on state finances. • Reduced the discount rate to 1.5% (from 2.5%) a record-low • Estimated # of Infections to Date: 35,920 (Cases per Million: 8,417) • Set up a USD 33M fund, to be financed by Kuwaiti banks • Announced # of Deaths to Date: 296 (Deaths per Million: 69) • Suspended fees on point of sales devices and ATM withdrawals + raised the Kuwait limit for contactless payments to KWD 25 (USD 79) from KWD 10 • Banned on all commercial passenger flights • Stimulus package to support SMEs including a cut in the capital adequacy • Closed schools, shopping centres, cinemas, wedding halls & requirements by 2.5% and easing the risk weighting for SMEs to 25% from 75% children’s entertainment • Postponed loan repayment and credit card facilitations for SMEs for six months • All educational institutions in Kuwait will reopen on 4 August • Kuwait will cut government entities’ budget for fiscal year 2020-2021 by at • Grocery stores’ working hours amended to 8:00 am to 4:00 pm least 20%. • Replace the complete lockdown with a partial curfew as of 31 May • Kuwait plans to reduce the expat population to just 30% of the total. MPs have • Eased its full-time curfew to a 12-hour one (from 6pm to 6am) and will proposed a quota system in addition to replacing expat government employees last three weeks before the next phase of easing is introduced (~100k) with Kuwaitis * On 10 June, Kuwaiti mosques opened their doors after a three-month closure * Kuwait Petroleum Corporation will stop hiring expats for the rest of 2020 and 2021 1 Arabia Monitor; IMF. * Updated as of 15 June, 2020. Arabia Monitor 2 COVID-19 Situation Report: GCC (2) Country Economic & Fiscal Health & Travel Related The new Oman Investment Authority formed on 4 June will take over almost all the assets of the country’s two existing funds, the State General Reserve Fund and the Oman Investment Fund, as well as assets held by the Directorate General of Investments at the Ministry of Finance. The idea of merging Oman’s two main investment funds has been around for several years, in part because they were seen to be duplicating each other’s functions. The new fund will face the challenge of contributing to support the government’s weak fiscal position, while also attracting inward investment. *The sultanate is also reeling from low oil prices, and will slash its crude production by 23% under the latest round of OPEC+ cuts. Oman’s 2020 budget was based on an oil price of USD 58 per barrel; on 14 June the price was USD 39.90 per barrel. • A USD 20B incentive package • Estimated # of Infections to Date: 24,524 (Cases per Million: 4,809) • Repo rate cut by 75bps to 0.5% • Announced # of Deaths to Date: 108 (Deaths per Million: 69) • Reduced Capital Conservation Buffers for banks to 1.25% from 2.5% Oman • Lending ratio increased to 92.5% from 87.5% • Closure of schools, public parks, and public gatherings • Deferment of loan instalments / interest / profit for affected borrowers • Will not allow cruise ships to dock at its ports during this period • Slashed budgets of civil, military and security agencies by 10 • Friday prayers at mosques suspended • Tourism and municipality tax breaks and free government storage facilities • Opened some commercial activities including car servicing, repair and rental, • Reduced approved liquidity for development budgets by 10% money exchanges, outlets selling electrical and electronic appliances, printing • Froze repayments of personal and housing loans for three months, from May • Ended the lockdown of Muscat governorate on 29 May * New USD 779M development project to support economic growth • At least 50% of employees in government entities can work from offices * Hotel revenues fell by 24% YoY to USD 140M starting 30 June * Ministry of Housing issued regulations banning expats from ownership of land * Dhofar Governorate, a tourist hotspot, to be put under lockdown from 13 June and real estate in specified places, with the exception of tourists complexes to 3 July as cases spike Three years into the Qatar rift, Doha has built up local production, especially of food, and prepared Qatar well to deal with the supply chain disruptions allowing it to overcome the challenges of the blockade and will help the economy weather the pandemic and lower oil prices. According to IMF forecasts, Qatar will be the only MENA country to post a fiscal budget surplus this year. Risks to the outlook include a delayed global recovery and lower LNG prices. • USD 23.3B stimulus package. • Estimated # of Infections to Date: 79,602 (Cases per Million: 28,350) • Postponed loan instalments with a grace period of six months • Announced # of Deaths to Date: 73 (Deaths per Million: 26) • Exempting food and medical goods from customs duties for six months • Fees on points of sale transactions and ATM withdrawals cancelled • School closure Qatar • Private sector companies to have 80% of their staff work from home, • Public transport stopped for 14 days effective 2 April for an initial two weeks. The working day will be reduced • Parks and public beaches closed till further notice to six hours, from 7:00 a.m. to 1:00 p.m., excluding grocery stores, • Qatar Airways expects to reopen routes this month: it hopes to fly to 52 pharmacies and restaurants destinations by end-May and up to 80 in June (compared with 165 total • Postponed USD 8.2B of unawarded contracts on capital spending projects destinations previously) • Fully opened its industrial area on 6 May • Restaurants and cafés are allowed to resume delivery and collection * Reduction of costs of non-Qatari employees in government entities by 30% via * Mosques reopening on 15 June salary cuts or layoffs * Partial reopening of restaurants on 1 July * New Public-Private Partnership to support investment in the non-oil sector * Reopening of malls and resumption of flights from low-risk nations 1 August 1 Arabia Monitor; IMF. * Updated as of 15 June, 2020. Arabia Monitor . 3 COVID-19 Situation Report: GCC (3) Country Economic & Fiscal Health & Travel Related The economic impact of the pandemic, including lost revenue from suspended pilgrimages, is compounding that of the drop in oil revenues. Saudi Arabia's export revenue stood at USD 53B in Q1 2020, down 20.7% from Q1 2019, mainly due to a 22% decline in oil export revenue. Saudi Arabia fiscally consolidating and managing heightened public expectations for the future will be crucial in maintaining public support for Crown Prince Mohammad Bin Salman when the pandemic subsides, and austerity hits the kingdom's generous social welfare programmes.